The suit follows the sale of a 16.6% stake designer’s eponymous company to JC Penney in December, bringing in $38.5 million along with a 10-year merchandise deal.

Macy’s, which has sold Martha Stewart merchandise since 2007, was none to pleased with the deal and warned almost immediately it was going to take a look at their agreements, which were to run through 2012.

But instead of just yanking Martha from its shelves, Macy’s sought to stop the deal and sued Martha Stewart Omnimedia for breach of contract.

The unsealed version is 115 pages dripping with claims that J.P. Morgan hid its long-held suspicions that Madoff’s reported investment gains were too good to be true, as The Journal’s Michael Rothfeld is reporting. The trusee, Irving Picard, is seeking more than $6 billion from J.P. Morgan.

The opening salvo of the lawsuit caught Deal Journal’s attention. It juxtaposes an email about a J.P. Morgan official skeptical about Madoff with a famous line from a Hans Christian Andersen tale.

As Deal Journal readers remember, this was the investment packed with souring mortgage securities, in which Goldman has acknowledged it didn’t appropriately disclose the role of investor John Paulson in designing the investment to allow him to short the housing market.

In its lawsuit, ACA said it bought $42 million in Abacus notes, and also wrote more than $900 million of insurance on the transactions. Those transactions lost money. Fine. But it wasan arm of ACA that helped pick the securities in the first place. If Abacus was “worthless,” as ACA says in the lawsuit, didn’t ACA help make it worthless? …

It isn’t exactly the Treaty of Paris, but it sure ends one of the nastier corporate tiffs. Valeant Pharmaceuticals and Steven Cohen’s hedge fund SAC Capital today agreed to settle a piece of their long-simmering legal spat over a controversial stock-price decline seven years ago.

A little legal wrap: In 2006, a Canadian specialty pharmaceuticals firm called Biovail had sued SAC and other hedgies, alleging they conspired to drive down the company’s share price around 2003, including by ghost-writing unflattering analyst reports. Biovail investors had also filed a similar, $4 billion class-action lawsuit against SAC in a New Jersey federal court. Both lawsuits were tossed out of court.

In February of this year, SAC Capital turned the tables with its suit for “vexatious” litigation against Valeant, which recently inherited the legal claims along with its purchase of Biovail.

Terra Firma’s Guy Hands says a Citigroup banker duped him into overpaying for the EMI record label.

An answer will come from a nine-person jury hearing a lawsuit brought by private-equity executive Guy Hands over his purchase of the EMI record label. The founder of Terra Firma is suing Citigroup for more than £6 billion ($8.4 billion), and the case hinges on whether the jury believes Hands or the main man on the opposite side of the courtroom, Citi banker David Wormsley.

Hands said Wormsley duped him into overpaying for EMI by making it sound like the 2007 auction was competitive, when Terra Firma turned out to be the only serious bidder. Citigroup denies that Wormsley misled Hands. The bank says Hands had locked in its bid for EMI, and says Hands now is looking for a scapegoat to blame for his soured deal.

In this “he said-he said” courtroom saga, Deal Journal asked trial consultants not involved in the case how popular anger about the financial crisis will influence jurors weighing the credibility of two financial bigwigs, Wormsley and Hands. They said the jury is likely to walk in disliking each side, but Citigroup may get the slightly shorter end of the stick.

“They probably won’t trust either of them, but they’ll probably trust a non-banker rather than a banker,” said Richard Waites, a lawyer, psychologist and CEO of jury-consulting firm, The Advocates.

Potash Corp. said in a court filing that BHP’s offer is “built upon false and misleading statements and omissions” about the bid background, risks of a deal and BHP’s plans for Potash Corp.

Among other claims, Potash Corp. said BHP hid its longstanding wishes to buy the company. Instead, the lawsuit claims BHP falsely bragged it planned to jump into the potash industry and crush industry leader Potash Corp……

The only thing Dow Chemical Chief Executive Andrew Liveris needs now is a plague of locusts. In the past eight weeks, Liveris has dealt with: Kuwait’s abandonment of a $17.5 billion joint venture; the threat of a steep, imminent downgrade of its longstanding investment-grade credit rating; the realization that an arranged $13 billion bridge loan [...]

About Deal Journal

Deal Journal is an up-to-the-minute take on the deals and deal makers that shape the landscape of Wall Street, including mergers and acquisitions, capital-raising, private equity and bankruptcy. In short, wherever money changes hands. Deal Journal is updated throughout each trading day with exclusive commentary, analysis, data, news flashes and profiles. The Wall Street Journal’s David Benoit is the lead writer, with contributions from other Journal reporters and editors. Send news items, comments and questions to deals@wsj.com.

Dealpolitik is Ronald Barusch's strategic look at deals currently making the headlines as well as the major forces at work in the deal-making world. He was a M&A lawyer with Skadden, Arps, Slate, Meagher & Flom for over 30 years. He retired in 2010 after 25 years as a partner at the firm. Click here for his current and archived columns.